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A Seed Fund Follow-Up
As sometimes happens, we ran out of time today before I had a chance to ask a few key questions. Luckily Angela Jackson of the Portland Seed Fund agreed to spend a few extra minutes in the studio to help clarify how exactly the public-private investing partnership is going to work.
The main question I had was how exactly the Fund is investing in the eight companies they announced yesterday. I'd seen the $25,000 that will go to each of those companies identified, variously, as "investments," "loans," and "loans convertible to stock."
It turns out that this last phrase is the most accurate.
Basically, two things could happen. If the company doesn't perform very well, they'll have to repay the $25,000 plus interest. Angela says that she and her partner are assuming a 50% failure rate over the next 180 days.
If a company does well and, say, attracts new venture capital, then the $25,000 would be converted to stock. Just how much stock the Portland Seed Fund would get — how much of an equity stake they'd have, in other words — will depend on the new valuation of the company.
I'm glad I didn't ask this question with only 30 seconds left in the live show!